Financial meltdown

I agree with the basic premises of article one. It did take all of these factors to align in order for such a major financial catastrophe. However, some of these factors are much less important and less to blame then others. In a sense, blaming concerned citizens for there “shock and panic” as a factor for the financial crisis is similar to saying my dog wouldn’t have bit you if you weren’t afraid of him. No, people were only afraid because the actions had taken place. The people had plenty of reasons to be afraid and “shock and panic” along with “severe contraction” were the effects of the outcome, not the causes. I do agree with the financial aspects of article one more. It brings up the key aspects, such as the detriment leverage and the uses of short-term debt to finance investments, which were extremely over-looked by companies. The main thing that the article ignores are the actions of the companies, crimes committed, corruption in government, and the fact that these companies ran themselves into the ground while getting filthy rich. Greed was a large factor in the cause of the crisis. CEOs weren’t happy with the normal compensations; they need a fleet of jets, cruise ships, fancy cars, and drugs at the company’s expense. The inflation rate
The second article comes off as more political. The article focuses mainly on what government needs to do in order to correct and “try” to prevent this from happening again. However, the article also states that history never repeats itself, it just rhymes. If history won’t repeat itself then the government regulations and actions being taken won’t help us in the next instance. I found this article to be an “oxymoron” in itself. We need the government to step in to fix it when they wouldn’t stand up to the plate and stop it when it was happening. The government had its hand in the problem to begin with and hired several of the CEO’s responsible. How can they be trusted to clean up the mess? The government needs to create regulations that are put in place to dictate the rules solely to justify punishments for the criminals that partake in the activities. Similar to the government bringing a suit against the rating agencies, punishments are needed to keep businesses honest. If there are laws in place that restrict the actions and a way to place blame then self-regulation can work. The only problem in this case is that the ones that committed the true crime weren’t the rating agencies; it was the investment banks.
In my opinion there is a pyramid structure for the blame. The investment companies at the top, for their manipulative practices, bullying and bribery that allowed them to cheat the system and make enormous amounts of profit. They encouraged high-risk investments and encouraged the mass selling of junk securities by paying outrageous wages with no repercussions. Not only were they were selling securities that were practically worthless, but betting against them. This is a Ponzi Scheme through and through. The companies knew exactly what they were doing and what would happen, yet no one went to jail. They made people that stood up to them look ignorant and ridiculed them for being whistleblowers. The investment banks were not only to blame for this catastrophe but the were the main reason for the “.com bubble.” They did the same thing earlier in the decade, promoting the selling of junk stocks to investors. The time has come that they need to be held accountable
Next in line for the blame are the banks. The banks made loans that they knew wouldn’t last and hoped to just pass the risk on to the next person in line. I also completely disagreed with the merger that made the banks “too big to fail.” I feel that when legislation is put in place to help control the market it should not be done away with just because the economy is doing well and the companies have strong lobbying power. The banks play the largest role in the financial system and when the foundation is weak and doesn’t make smart decisions the whole system is bound to crumble. The economy has the highest need for banks to be stable and make good business decisions. The banks are the reason that the “.com bubble” had a much less drastic affect on the economy.
The rating agencies are next to blame. The crediting agencies made it possible for the investment banks to sell the securities by rating them higher than they should have been. The agencies knew that they were being used to manipulate investors. The idea that they did it so they wouldn’t lose money is a terrible argument. Had they properly rated the securities and came out with a statement saying that other agencies ratings are incorrect then they could have stopped this from happening. The agencies profited well from the scheme and should be held accountable. However, I don’t feel they should be the first to have charges brought against them like has happened.
The federal government is the last major entity to be blamed. The federal government should be held to the highest accountability, however it is well know how much lobby power exists and the political influence large industries have. The main reason for blaming the government in this case is because of punishment. I could explain one hundred ways they could have prevented it or even slightly had their hands in the meltdown, but I won’t. The major disgust with the federal government of the United States of America should be because they punished no one and bailed out those most responsible. We like to view our government as the best in the world yet they let the people that stole trillions of dollars keep their money and bailed out their businesses. Yes the meltdown was a major catastrophe and yes there was need to gain consumer confidence and not completely allow everything to fall apart, that is not my argument. The argument is that they let them keep their money and allowed them to keep making huge salaries in such a time of devastation and chaos. The government should have handled the situation much differently, but what we learned from the meltdown is that people in Washington must have profited largely as well. Why else would they not feel then need to catch the criminals?

Conclusion

The benefits of this meltdown will be short lived. People move on and forget the repercussions of their actions as soon as things get good again. There will always be greedy people in the world looking to get rich off of others regardless of the costs and people in Wall Street are known risk takers that have a desire for action. The have created new ways of investing and will continue to do so. Unless people are held truly accountable for their actions the problem will continue and happen more frequently. “What experience and history teaches us is that people and governments have never learned anything from history.” The next bubble has already started….